Stocks Moving To The Upside In Mid-Afternoon Trading - U.S. Commentary

By IBT Staff Reporter On 05/28/09 AT 2:58 PM

RTTNews - After turning in a lackluster performance for the first half of the trading day, stocks have surged higher in mid-afternoon trading on Thursday. The major averages have firmly reclaimed their positions in positive territory, rising to new highs for the session.

The major indices were bolstered by the results of the $26.0 billion seven-year note auction conducted by the Treasury Department earlier this afternoon. The sale drew a high-yield of 3.30 percent while seeing modestly strong demand, with the bid-to-cover ratio coming in at 2.26.

The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.

The demand for the long-term notes mitigated some trader concern regarding the rising interest rates in the headwind of the Federal Reserve's quantitative easing measures.

Earlier in the day, traders digested a report from the Commerce Department that indicated a modest increase in new home sales in the month of April. However, the sales growth came amid a notable downward revision to the pace of sales in March, which weighed on investor prospects.

Ahead of the disappointing housing data, investor sentiment was bolstered by jobless claims for the week ended May 23rd that fell more than expected. In a separate report, data from the manufacturing sector showed that durable goods orders for April came in higher than economists had expected.

The major averages are currently posting substantial gains, just off their best levels of the day. The Dow is currently up 118.04 at 8,418.06, the Nasdaq is up 20.62 at 1,751.70 and the S&P 500 is up 14.64 at 907.70.

Dow Components

Most Dow components are solidifying their positions in mid-afternoon trading, contributing to the strong recovery shown by the blue chip index from its lows of the day.

The Dow is being boosted by shares of AT&T (T), which have climbed by 2.8 percent on the session. With the advance, the stock continues to recover from the more than two-month low set late last week.

JP Morgan (JPM) is also helping to lead the Dow higher, with the financial services giant currently up 5.2 percent. Shares of Chevron (CVX), American Express (AXP), and Microsoft (MSFT) are also showing strong upward moves.

On the other hand, shares of Home Depot (HD) have come under pressure, with the home improvement retailer currently down 2.5 percent after hitting a two-month intraday low. General Motors (GM) and Caterpillar (CAT) are also posting notable losses.

Sector News

Strength has emerged in most of the major sectors in mid-afternoon dealing, as reflected by the resurgence being shown in the major averages.

Steel stocks are advancing considerably, as reflected by the 4.3 percent gain being shown by the Amex Steel Index. With the surge, the index is poised to finish at its best closing level in over seven months. The index is also challenging its seven month intraday high.

Most other resource stocks also continue to see significant strength, with gold stocks posting notable gains and driving the Amex Gold Bugs Index up 4.1 percent. Oil and natural gas stocks are also moving higher along with their respective commodities.

Meanwhile, housing stocks are seeing continued weakness, with the Philadelphia Housing Sector Index currently down by 1.2 percent. At its low for the session, the index was at its worst intraday level in well over a month.

In Focus: Economic Data, General Motors, Time Warner

Earlier, a report from the Commerce Department showed that new homes sales edged up 0.3 percent to an annual rate of 352,000 in April from a revised 351,000 in March. Economists had expected sales to rise to 360,000 from the 356,000 originally reported for the previous month.

A separate report from the Labor Department showed that initial jobless claims came in at 623,000 in the week ended May 23rd. This was down 13,000 from a revised mark of 636,000 in the previous week. Economists had expected claims to fall to 628,000 from the 631,000 originally reported for the previous week.

At the same time, continuing claims, which measure the number of people receiving ongoing unemployment help, rose once again and set another record high. The statistic climbed 110,000 to 6.788 million.

Meanwhile, a report from the Commerce Department showed that orders for durable goods increased by much more than expected in the month of April, although the stronger than expected growth came after a steep decline in March.

The report said that durable goods orders jumped 1.9 percent in April following a downwardly revised 2.1 percent decrease in March. Economists had expected orders to edge up 0.5 percent compared to the 0.8 percent drop that had been reported for the previous month.

In other news, General Motors bondholders have accepted an amended debt-for-equity offer that will help the auto giant restructure.

The firm also said that a recent U.S. Treasury proposal provides incentives for GM's unsecured bondholders to support GM's restructuring efforts in the event GM decides to pursue a 363 sale as part of its likely bankruptcy proceeding.

The company said that the implementation of this proposal would result in a New GM with a healthy balance sheet, putting the new company on a clear path toward long-term viability and success.

Meanwhile, Time Warner Inc. (TWX) announced that its Board has authorized management to proceed with plans to spin off its AOL Internet business. Following the proposed transaction, AOL would be an independent, publicly traded company.

Other Markets

Stocks markets across the Asia-Pacific region turned in a mixed performance on Thursday, although the markets in Hong Kong and mainland China were closed. Japan's benchmark Nikkei 225 Index edged up 0.1 percent.

Meanwhile, the major European markets all closed firmly in negative territory. The French CAC 40 Index and the German DAX Index fell 1.0 and 1.4 percent, respectively, while the U.K.'s FTSE 100 Index also closed down 0.7 percent.

In the bond markets, treasuries are seeing some volatility on the day. Subsequently, the yield on the benchmark note is currently down less than a basis point at 3.69 percent.